AppTech Payments (APCX) - 2025 Q1 - Quarterly Report

Part I Consolidated Financial Statements (unaudited) AppTech Payments Corp. reported increased Q1 2025 revenues but a net loss, with declining assets and recurring losses raising going concern doubts Consolidated Balance Sheets As of March 31, 2025, the company's total assets were $6.91 million, a decrease from $8.99 million at December 31, 2024, driven by a drop in cash and the collection of an equity receivable, while total liabilities and stockholders' equity also decreased Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $417 | $868 | | Total current assets | $739 | $2,420 | | Total Assets | $6,911 | $8,986 | | Liabilities & Equity | | | | Total current liabilities | $3,188 | $3,440 | | Total Liabilities | $3,249 | $3,519 | | Total stockholders' equity | $3,662 | $5,467 | Consolidated Statements of Operations For the three months ended March 31, 2025, revenues increased by 107% to $217 thousand, resulting in a net loss of $2.64 million, an improvement from the $3.04 million net loss in Q1 2024, primarily due to reduced operating expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $217 | $105 | | Gross profit | $89 | $94 | | Total operating expenses | $2,745 | $3,125 | | Loss from operations | ($2,656) | ($3,031) | | Net loss | ($2,641) | ($3,037) | | Basic and diluted net loss per common share | ($0.08) | ($0.13) | - Stock-based compensation included in selling, general and administrative expenses increased to $836 thousand in Q1 2025 from $447 thousand in Q1 2024[23] Consolidated Statements of Cash Flows For the first three months of 2025, net cash used in operating activities was $1.80 million, an improvement from the prior year, with $1.35 million received from financing activities, resulting in a net decrease in cash of $451 thousand and an ending cash balance of $417 thousand Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,801) | ($2,164) | | Net cash used in investing activities | $0 | $0 | | Net cash provided by financing activities | $1,350 | $2,436 | | Changes in cash and cash equivalents | ($451) | $272 | | Cash and cash equivalents, end of period | $417 | $1,553 | Notes to the Consolidated Financial Statements The notes detail the company's Fintech business, accounting policies, and significant events, including the FinZeo platform, a going concern warning due to recurring losses, significant customer concentration risk, ongoing legal proceedings, and a potential Nasdaq delisting - The company is a Fintech firm utilizing payment processing and digital banking technologies, with its proprietary software platform named FinZeo[31][32] - Recurring operating losses and current financial conditions raise substantial doubt about the Company's ability to continue as a going concern; management has initiated actions to reduce debt and is pursuing additional funding[37][38] - For Q1 2025, 74% of revenue was generated from two customers, and as of March 31, 2025, 81% of accounts receivable was from two customers, indicating significant concentration risk[44][45] - Subsequent to the quarter end, the company anticipates being delisted from Nasdaq and transitioning to the OTCQB market due to failure to meet the minimum bid price requirement[85] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's FinZeo™ Fintech platform, reporting Q1 2025 revenue growth of 107% driven by ISO and lending activities, alongside decreased general and administrative expenses but increased R&D, while liquidity remains a major concern due to recurring losses, prompting operational restructuring and a search for new funding Business Overview The company operates in the financial technology sector with its FinZeo™ platform, a modular cloud-based architecture providing Payments-as-a-Service (PaaS) for digital payment acceptance and Banking-as-a-Service (BaaS) for financial institutions, designed for white-label integration by ISOs and ISVs - AppTech's core offering is the FinZeo™ platform, an all-in-one Fintech solution providing Payments-as-a-Service (PaaS) and Banking-as-a-Service (BaaS)[92] - PaaS solutions include ACH, credit/debit card processing, eCheck, and text-to-pay, delivered via integrated solutions or APIs[93] - BaaS offerings feature an automated underwriting portal to expedite business onboarding for financial institutions, ISOs, and ISVs[94][95] Results of Operations Comparing Q1 2025 to Q1 2024, revenue increased 107% to $217 thousand, primarily from ISO and lending activities, while cost of revenue rose significantly due to revenue sharing, general and administrative expenses fell by $516 thousand, and research and development expenses increased by $136 thousand for platform enhancements Comparison of Operations for the Three Months Ended March 31 (in thousands) | Item | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $217 | $105 | +107% | | Cost of Revenue | $128 | $11 | +$117 | | General and Administrative | $1,965 | $2,481 | -$516 | | Research and Development | $780 | $644 | +$136 | Liquidity and Capital Resources The company's liquidity is strained, with cash and cash equivalents decreasing to $417 thousand at March 31, 2025, and recurring operating losses raising substantial doubt about its ability to continue as a going concern, prompting management to restructure operations, reduce headcount, and actively pursue additional funding - Cash and cash equivalents stood at $417 thousand as of March 31, 2025, down from $868 thousand at December 31, 2024[112] - The company has experienced recurring operating losses, raising substantial doubt about its ability to continue as a going concern[113] - Management's plan to address the going concern issue includes operational restructuring, headcount reduction, and pursuing additional funding[114] Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,801) | $(2,164) | | Net cash provided by financing activities | $1,350 | $2,436 | Critical Accounting Policies and Estimates The company identifies equity-based compensation and goodwill impairment as critical accounting policies requiring significant estimates and judgments, with fair value of stock options estimated using the Black-Scholes model and goodwill tested annually for impairment based on future cash flows and discount rates, concluding no impairment as of the reporting date - Equity-Based Compensation: Fair value of stock options is estimated using the Black-Scholes model, which requires subjective assumptions for inputs like expected volatility and term[124] - Goodwill Impairment: Goodwill is tested for impairment annually by comparing the carrying amount to fair value, which is determined using estimates of future cash flows, discount rates, and long-term growth rates[125] - Management concluded that the fair value of goodwill from the FinZeo acquisition significantly exceeds its carrying amount, and there is no significant risk of impairment[127] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, AppTech is not required to provide the information for this item - The company is a "smaller reporting company" and is not required to provide quantitative and qualitative disclosures about market risk[132] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter, while acknowledging the inherent limitations of any control system - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[133] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[134] Part II Legal Proceedings The company was involved in litigation with three former employees regarding severance payments, which was settled in March 2025 for $172 thousand, with payments made in March and May 2025 - In March 2025, the Company settled a lawsuit with three former employees over severance payments for a total of $172 thousand[137] Risk Factors As a smaller reporting company, AppTech is not required to provide the information for this item - As a smaller reporting company, the company is not required to provide risk factor disclosures in its Form 10-Q[138] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[139] Other Information During the quarter ended March 31, 2025, no director or officer of the company adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated any Rule 10b5-1 trading arrangement during the quarter[141] Exhibits The report includes certifications from the Chief Executive Officer and Chief Financial Officer under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as well as Inline XBRL documents - Exhibits filed with the report include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and Inline XBRL data files[143]